Fin/Inv

From Bloomberg: FDIC Sets Standards for Private-Equity Firms to Buy Shut Banks (ht Anthony)

The Federal Deposit Insurance Corp. approved guidelines for private-equity firms to buy failed banks ... agreeing to lower to 10 percent from the proposed 15 percent the Tier 1 capital ratio private-equity investors must maintain after buying a bank.

From the FDIC: Attachment: Final Statement of Policy of Qualifications for Failed Bank Acquisitions

As a reminder, the deadline for Corus Bank bids is reported to be next week. So this is just in time.

Also, the Q2 FDIC Quarterly Banking Profile will probably be released tomorrow AM (including stats on the Deposit Insurance Fund and the number of problem banks at the end of Q2).

Die Neubauverkäufe in den USA sind im Juli 2009 gemäß den heutigen Angaben des Census Bureau um +9,6% zum Vormonat auf 433‘000 Wohneinheiten aufs Jahr hochgerechnet (SAAR) gestiegen!

> Selbst zum Vorjahresmonat fallen die Neubauverkäufe nur noch um -13,4%! Dies ist allerdings vor allem auf den niedrigeren statistischen Basiseffekt zurückzuführen, denn bereits im Juli 2008 waren die Neubauverkäufe kräftig abgeschmiert. Im Vergleich zum Hoch im Juli 2005 mit 1,389 Millionen verkaufter Wohneinheiten beträgt der Absturz im Juli 2009 immer noch -68,9%! Das Allzeittief seit Erhebung der Daten im Jahr 1963 wurde im Januar 2009 mit nur 329'000 verkauften Wohneinheiten markiert! Quelle Daten: PDF Census.gov <

> Nicht saisonbereinigt und nicht auf das Jahr hochgerechnet wurden im Juli 39'000 Wohneinheiten verkauft. Das Hoch lag bei 127'000 verkaufter Einheiten im März 2005, ein Absturz seitdem von -69,29%! Das Tief wurde not seasonally adjusted ebenfalls im Januar 2009 mit 24'000 verkauften Wohneinheiten markiert. <

> Der mediane Kaufpreis für neue Häuser fiel im Juli um -0,14% im Vergleich zum Vormonat auf 210'100 Dollar. Im Vergleich zum Vorjahresmonat fielen die durchschnittlichen Preise um -11,5%. Das Hoch wurde im März 2007 mit 262'600 Dollar markiert, ein Einbruch bei den Preisen der Neubauverkäufe seitdem um -20%. Immerhin die Preis-Blase, aus exzessiver Kreditausweitung und Geldentwertung bewegt sich immer noch komfortabel mit +1221% über dem Level des Beginns der Datenerhebung im Jahr 1963. <

> Auch die Anzahl der verkauften bestehenden Häuser stieg im Juli 2009, um immerhin +7,2% zum Vormonat auf 5,24 Millionen (SAAR) und selbst im Vergleich zum Vorjahresmonat steht ein Plus von 5%! Im Juni 2005 wurde das Hoch mit dem Verkauf von 7,27 Millionen bestehender Häuser markiert. Ein Einbruch seitdem von -27,9%! <

> Der durchschnittliche Verkaufspreis gebrauchter Immobilien fiel im Juli um -2% zum Vormonat auf 178‘400 Dollar und um -15,1% im Vergleich zum Vorjahresmonat. Das Hoch wurde im Juli 2006 mit einem durchschnittlichen Kaufpreis von 230‘200 Dollar erzielt, immer noch ein Einbruch von -22,5% seitdem ! Quelle Daten: PDF Realtor.org <

Selbst diese kleine Erholung am US-Immobilienmarkt, mit einer steigenden Zahl an Verkäufen, bei immer noch leicht fallenden Preisen, ist hauptsächlich durch eine staatliche Förderung verursacht!

Alle first-time buyers, also Käufer die erstmals eine Immobilie erwerben, genaugenommen noch etwas weicher, die seit 3 Jahren kein Eigentum als Hauptwohnsitz angemeldet haben, erhalten eine Steuergutschrift von 10% des Kaufpreises bzw. maximal 8000 Dollar. Diese Steuergutschrift kann sogar ganz unbürokratisch als Anzahlung geleistet werden.

> Im Juli gab es nun eine wahre Flut an first-time homebuyers, laut Campbell Communications waren es 43% aller Käufer. Die National Association of REALTORS (NAR) gab den Anteil der Erstkäufer im Juli wiederum mit 29% an! Bis 30. November läuft dieses Programm noch und könnte durch die vorgezogenen Käufe noch für etwas Auftrieb bei den Verkaufszahlen von Immobilien sorgen! <

Eine große Rolle spielen auch die vielen Immobilien, die durch den Foreclosure-Prozess in die Hände der Banken (REO, Bank repossessions) gefallen sind und nun von diesen auf den Markt geworfen werden, das Angebot steigern und für moderate Preise sorgen. Der Anteil der damaged REO's betrug 26% und der move-in REO's 23% aller verkauften bestehenden Häuser (existing home sales) im Juli.

Nach dem Auslaufen der staatlichen Förderung werden die Verkäufe von Immobilien wieder schnell schrumpfen!

Querschuesse-Forum

Kontakt: info.querschuss@yahoo.de

Interesting article I pulled using InfoNgen. Not that I've ever heard of PhillyBurbs.com or that I have any knowledge of the fashion value of this source. What is interesting is that the writer has clear fashion knowledge and they have gone from thinking that Liz Claiborne (LIZ) is a 'granny' concept to hip enough for the writer to wear.My take is that Issac Mizrahi is making the brand hip. This

What is your trading process?

* How do you generate your best trade ideas?

* How do you manage risk most effectively?

* How do you manage positions most effectively to get the most out of trade ideas?

* How do you most effectively manage yourself and your emotions during trading?

* How do you prepare for market days most effectively?

* How do you best review markets and trading performance for optimal learning?

What I find is that the traders who have been successful over the long haul know the answers to these questions and also have very distinctive answers.

Like Toyota or UPS, they have developed their own, unique processes that are both efficient and effective. Success is a function of refining processes over time and becoming ever more consistent in following those processes.

If you *know* your processes, you can more readily develop confidence in them. Many times that is the difference between making the good trade and not; avoiding the bad trade and not.

Half of the challenge of trading is finding your best practices; the other half is implementing them with fidelity and consistency.

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Before I get started I thoughy everyone could use a laugh. Check out the new stimulus T-shirt:



Classic isn't it? I laughed my butt off when I saw this one.

Ok, back to the markets.

Today was another "borefest" on Wall St as the bears and the bulls continue to tango around the 1000-1050 area on the S&P.

We got some more bullish housing data on new and existing home sales. I have to admit, that tax credit seems to really be working. A few mortgage brokers have told me things(especially on the low end) that things have picked up as a result of the government stimulus.

What's interesting here is when you dig into the hew housing data, the real demand is coming from houses that haven't been built yet versus the spec "McMansions" that are already up.

According to the most recent report, new home sales are up 33% for houses that haven't been built yet while the new home sales for homes that are already up were down 6%. The reason for this is builders have adjusted to build what the buyer is looking for: Smaller and cheaper homes!

As I have said before, the 1-3's or 100-300k end of the market has been doing extremely well as a result of the first time home buyer tax credit. Homes in this price area are affordable which is critical in an environment that's dominated by tight lending. Buyers today must have the income needed to afford the mortgageor the deal isn't going to happen.

The answer to the problem with housing is simple folks. The price to income ratio must drop to where buyers can actually afford to buy them which is historically 3 times income. For example if you make $70k then you can comfortably afford something in the $210k range.

This means one of two things has to happen:

A) Incomes have to rise sustantially.

Or:

B) Housing prices must drop to fall in line with incomes.

Since we are in the midst of an economic collapse with soaring unemployment, I think we all know that option B is the only choice that realistically works.

The only way we got to this point was because Wall St created Ponzi lending products that enabled us to buy homes that we had no business buying. In the bubbly areas the price/income soared to 10-1 as buyers used no doc and subprime loans to buy up everything in sight.

What we have now learned is these homes were simply unaffordable which is why we now see a 13% delinquency rate on all mortgages right now!

What we are now learning as prime defaults soar is it didn't matter what your income bracket was: EVERYONE MADE THE SAME MISTAKE OF BUYING HOMES THEY COULDN'T AFFORD.

This is why the high end of the home market is totally screwed: The lending products are no longer available to buy these homes.

Banks would laugh at you today if you came to them with a loan application had a price to income ratio of 10-1. They would deny your application before you got two feet inside the bank. You would walk out of there with the word "DENIED" stamped right across your forehead.

Economic Disconnect found a great chart from Bubble-meter decribing the huge disparities in demand at the different home sale price levels:

The Bottom Line:

The numbers don't lie folks. The cause of this crisis is simple: Housing prices historically got way out of whack with incomes. The answer is also simple: All homes must fall back to levels where people are able to qualify.

The problem we have here is this adjustment will destroy the balance sheets of the banks on Wall St. The government has been desperately trying to prop up housing prices by lowering interest rates in an attempt to reflate the bubble and keep prices elevated.

Washington needs to realize that this WILL NOT WORK! Any economist with half a brain can figure out the problem here. Middle class Americans had no business buying homes for 500-600k just like upper middle class Americans had no business buying $2 million homes.

I also want to point out that this insanity was basically seen in certian "bubble areas" of the country. 600k homes in areas where housing is affordable will hold more of their value because there is less supply of them.

The fallout of this stupidity at the mid to high end will result in an upper end collapse in home prices because there simply aren't enough buyers to soak up the inventory.

This will put many prime loans at serious risk and will trigger another string of losses for the banks.

If you are in a home under $250k you have probably taken the largest part of your hit from the housing bust unless lending rates rise in the bond market as a result of our unfathomable deficit's.

If you are in the market for something above the low end in a bubble area, be patient, those $600,000 homes in suburbia will be $300,000 within a year or two.

As for the stock market: It's barely worth mentioning right now because the volumes are so low. When insolvent government owned stocks like AIG, C, BAC, and F are responsible for 40% of the trading volume on the exchange please accept this advice: Run away as fast as you can unless your an obsessed day trader or addicted to gambling!

These stocks are being gamed daily via HFT's so I would avoid this charade because you might be the one that gets stuck holding the ball when they decide to move onto something else.

The price action overall has been insane on Wall St recently. There is no rational way to accurately analyze it. Hopefully when the summer ends and the big players on the street get back to work, the market might start making sense again.

From the NY Times: Adjustable Mortgages Loom as Threat to Housing Recovery
(ht Shnaps, Ann)

When Harvey Clavon took out an exotic mortgage to refinance his home in Santa Clarita, Calif., three years ago, he thought he knew what he was doing.

Mr. Clavon, 63, was planning to sell the home in a few years and retire to Palm Springs. So he got a loan called an option adjustable rate mortgage, or option ARM, which allowed him the option of paying less than the interest for the first five years.

On his annual salary of $100,000 as a television camera operator, he could afford the $2,200 initial mortgage payments. And he would sell the home before the mortgage reset.
...
Mr. Clavon made only minimum payments on his mortgage, his balance has risen to $680,000 from $618,000, on a house worth closer to $400,000.

What a surprise!

And the article also has a quote from the Shnapster's friend Ted Jadlos on Option ARMs!

“Everyone’s been focused on subprime, but we’re more concerned about this,” said Todd Jadlos, managing director of LPS Applied Analytics ... “By the time subprime defaults had increased 200 percent, in June and July of 2007, option ARMs had gone up 400 percent. People just didn’t notice because the overall numbers weren’t as high.”

And some more mortgage fraud news: Task Force Cracks Mortgage Fraud Case Involving 453 Homes

Ohio Attorney General Richard Cordray and Cuyahoga County Prosecutor Bill Mason today announced details of an 18-month investigation that led to indictments against 41 people and four companies. The defendants are alleged to have engaged in real estate transactions to purchase 453 homes with fraudulent loans totaling $44 million. ...

The scheme involved using straw buyers to purchase homes, falsely claiming home improvements were performed on houses in order to refinance them, and then selling houses to unqualified buyers with the assistance of real estate agents, mortgage brokers and title companies.

Lenders were tricked into believing that the buyers were making at least a 10% down payment when they were not, that the buyers had assets when they did not, and that the properties were worth more than they actually were. [Defendants] defrauded lenders through loan application fraud, down payment fraud and loan distribution fraud. The defendants siphoned off more than $31 million in profits from their criminal enterprise. Eventually, 358 of the homes fell into foreclosure.

Hey, almost 100 homes in this scheme are not in foreclosure!

As tax breaks expire, home sales decline ... from Reuters: California tax credit expires, home permits sink

Homebuilding permits filed in California in July fell significantly from June as a state tax credit for buyers of new homes expired ...

The tax credit offered earlier this year pulled homebuyers from the sidelines back into the state's beleaguered market for new homes but they have retreated since the incentive lapsed last month.

"Our homebuilders reported a significant drop in traffic last month, largely due to the state closing the window on the homebuyer tax credit," said Robert Rivinius, president and chief executive of the California Building Industry Association.

He noted the state government stopped taking applications for the $10,000 new-home credit at the beginning of July.

"Activity stopped as quickly as it started, which is bad news for housing and the broader economy," Rivinius said.
emphasis added

Just imagine what will happen when the $8K first-time home buyer tax credit expires.

And a preview for BFF: Sioux City Bank at Risk of Failing

Vantus Bank, based in Sioux City, is at risk of failing because of the recession and rising bad loans.

Federal regulators have told the bank, which has 13 locations in Iowa, that its plan to increase its capital was unacceptable. According to a filing with the U.S. Securities and Exchange Commission, it must be sold or liquidated by Sept. 30.

I will comment on this in greater detail later this evening, time permitting, however the story is significant enough to be spread now.  It is a very significant step forward in ensureing that the integrity of a true free market is preserved. This story is going to get messier as more details come to light. Goldman Sachs Subpoenaed Over Tipping Allegations - Financials * US * News * Story -

Earlier today, we noted that short interest as a percentage of float is currently at its lowest level since 2007. Another group of investors who have turned decidedly less bearish are newsletter writers. According to the weekly data from Investors Intelltigence, bullish sentiment among newsletter writers is at its highest levels since January 2008. At the other end of the...

Only 39 stocks in the S&P 500 are trading below their 50-day moving averages. That means nearly 93% of stocks in the index are trading abover their 50-days, which is the highest reading in at least three years. Below we highlight the stocks in the index that are the most overbought and oversold versus their 50-days. As shown, AIG is...

Heute veröffentlichte das japanischen Finanzministeriums die Daten zur Handelsbilanz, für den Monat Juli 2009. Diese zeigen weiterhin eine Schwäche der exportorientierten japanischen Wirtschaft an!

> Quelle: PDF Customs.go.jp <

> Die Exporte brachen im Juli um -36,5%, nach -35,7% im Juni 2009 ein, jeweils im Vergleich zum Vorjahresmonat. <
> Das unbereinigte Exportvolumen lag im Juli 2009 bei 4,845 Billionen Yen (51,4 Mrd. Dollar). Das Tief wurde im Januar 2009 mit einem Exportvolumen von 3,48 Billionen Yen markiert, das Hoch beim Export lag bei 7,681 Billionen Yen im Monat März 2008! Quelle Daten: Customs.go.jp <

2:30pm EDT: I’m not really watching this mess of a market today as I’m preparing for my three day trip to San Diego. As an added highlight it turns out that T.K. will be in SoCal this weekend and I’m planning to finally meet up with him in person

In terms of charts - this is the one I want you to focus on - forget about everything else. You know what this is called? The great ‘big boys are unwinding their positions pattern’

You know what to do - forget about those short term gyrations - focus on the long term. IF we are so lucky to get another rip to the upside today I will use it to add to my growing list of long term OTM puts (about 4 - 6 months out).

Nothing else to say about this mess - it’s the whipsaw before the storm.

There won’t be a wrap up post after the bell today as I don’t have the time. I might chime in late tonight for a quick update however.

Housing Numbers You Don't See - Realty Check with Diana Olick - CNBC.comShared via AddThis

Hats off to a couple of readers, who noted my earlier heat map post and commented on the value of the heat maps and market data found on the FinViz site. Above we see a snapshot of just two sectors from a much larger map. Note how the stocks that are most highly weighted in the sectors have the largest boxes. The boxes are shaded red if the stock is down; green if up; and grey if neutral. The map allows a quick look at the colors of each sector, but also is organized by subsectors. This enables you to see if strength or weakness within the sectors is more general or mixed.

I will have more to say about FinViz in an upcoming post. The value here is in condensing a large amount of information into a clear display that facilitates quick processing and action.
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Last night after the close, the major exchanges released their mid-month short interest data, or as some would say, their lack of short interest data. As shown in the chart below, the average short interest as a percentage of float for stocks in the S&P 1500 is currently at 6.9%. This is the lowest level since February 2007, when the...

Just a quick thought for your consideration.  Media reports of late have all focused on how various numbers, statistics etc etc are all “beating analyst expectations”. If everything is beating the expectations put forth by these so-called “analysts” than what makes these analysts worthy of any attention or credibility?  Obviously they have been wrong  more times than they have been right lately.

By Spencer;

The new data that durable goods orders jumped 4.9% from June to July is a nice indicator that the economy is bottoming and it clearly beat expectations. Yes, a large part of the jump was civilian aircraft orders that tend to be lumpy, but even excluding civilian aircraft orders jumped
1.9% month to month.

On a smoothed basis non-defense capital goods orders -- a good leading indicator of capital spending in the GDP accounts is also showing nice gains. The compound three month growth rate for the total is 41%, and excluding aircraft it is 15.5%.

With all the news on the deficit, health care, etc., etc., the normal sources seem to be overlooking this report.

For over 8 months now, I have been chronicling the plight of the 10 year Treasury bond. Based upon the "next big thing" indicator it was my expectation that yields on the 10 year Treasury bond would rise once there was a monthly close above a yield of 3.342%. This occurred at the end of May, 2009.

The Israel Securities Authority yesterday disallowed a vote by a minority shareholder, and today Zim has contacted an attorney to try and get something done to change this.

They desperately need money to avoid bankruptcy.

From Lloyd's List

In a statement released today, Zim said: “It is important to note that Israel Corp’s position differs from the Israel Securities Authority, it believes that the required majority has in fact been achieved and the Board is therefore presently seeking legal council to consider its options.”

The statement goes on to say, “if the controlling shareholders and Bank Leumi votes had been counted, over 90% of the votes would be in favor of the fund injection.”

Zim chief executive Rafi Danieli said: “With the support of Israel Corp, ZIM is continuing with its efforts to formulate a long-term, comprehensive financial restructuring plan for the company.”

Sources in Israel said that a legal dispute with regulators would not typically end up in the court system, but would be solved through direct negotiations. However, analysts noted that Zim’s survival is at risk if the dispute persists.
....................
Virtually no one believes that Zim can survive without infusion from its parent company. Zim employs over 7,000 people and is considered by some to be the national symbol of Israeli shipping.

click here for link

We're big fans of cool presentation methods here at Bespoke, and Google Finance has recently added a new sparkline feature that we like that highlights price movements among comparable stocks. Below is a snapshot of the charts that can be shown on a monthly, yearly, and even intraday basis. While Yahoo! Finance dominates Google Finance in terms of traffic, Google...

10:40am EDT: I hate to be right about these things - but here you have it:

Dollar is up strongly today and seems to have formed a bottom (for now).

Meanwhile the SPX is up strongly on some bullshit news (which as you all know I fade).

Correlations can break any time and the ole’ buck has moved along with equities every so often in the past. Moral of the story: Don’t base your trading on correlations! Use them as ‘complementary information’ at the very most.

And why ‘twice’? Well, the market is up - of course - I keep warning you rats that we bears will have to sit through mor pain before the monster has been slayed. Give it time and wait for new highs before you start adding new short positions.

Long term, people, long term. I know you yank rats all have a shot out nervous system from decades of pigging out on high fructose corn syrup and jolt cola - but stick your fingers in your ears, close your eyes, then hold your breath and just for a second in your life try to think long term.

Anyway, I’ll let this craziness subside before I post an updated count - tape is too spasmodic right now. Also, I just got up - need a cup o’ tea first

Statement of Principles

June 3, 1997

American foreign and defense policy is adrift. Conservatives have criticized the incoherent policies of the Clinton Administration. They have also resisted isolationist impulses from within their own ranks. But conservatives have not confidently advanced a strategic vision of America's role in the world. They have not set forth guiding principles for American foreign policy. They have allowed differences over tactics to obscure potential agreement on strategic objectives. And they have not fought for a defense budget that would maintain American security and advance American interests in the new century.

We aim to change this. We aim to make the case and rally support for American global leadership.

As the 20th century draws to a close, the United States stands as the world's preeminent power. Having led the West to victory in the Cold War, America faces an opportunity and a challenge: Does the United States have the vision to build upon the achievements of past decades? Does the United States have the resolve to shape a new century favorable to American principles and interests?

We are in danger of squandering the opportunity and failing the challenge. We are living off the capital -- both the military investments and the foreign policy achievements -- built up by past administrations. Cuts in foreign affairs and defense spending, inattention to the tools of statecraft, and inconstant leadership are making it increasingly difficult to sustain American influence around the world. And the promise of short-term commercial benefits threatens to override strategic considerations. As a consequence, we are jeopardizing the nation's ability to meet present threats and to deal with potentially greater challenges that lie ahead.

We seem to have forgotten the essential elements of the Reagan Administration's success: a military that is strong and ready to meet both present and future challenges; a foreign policy that boldly and purposefully promotes American principles abroad; and national leadership that accepts the United States' global responsibilities.

Of course, the United States must be prudent in how it exercises its power. But we cannot safely avoid the responsibilities of global leadership or the costs that are associated with its exercise. America has a vital role in maintaining peace and security in Europe, Asia, and the Middle East. If we shirk our responsibilities, we invite challenges to our fundamental interests. The history of the 20th century should have taught us that it is important to shape circumstances before crises emerge, and to meet threats before they become dire. The history of this century should have taught us to embrace the cause of American leadership.

Our aim is to remind Americans of these lessons and to draw their consequences for today. Here are four consequences:

• we need to increase defense spending significantly if we are to carry out our global
responsibilities today and modernize our armed forces for the future;

• we need to strengthen our ties to democratic allies and to challenge regimes hostile to our interests and values;

• we need to promote the cause of political and economic freedom abroad;

• we need to accept responsibility for America's unique role in preserving and extending an international order friendly to our security, our prosperity, and our principles.

Such a Reaganite policy of military strength and moral clarity may not be fashionable today. But it is necessary if the United States is to build on the successes of this past century and to ensure our security and our greatness in the next.

This is your Bush foreign policy program in a nutshell. As developed and endorsed by the following team already in place back in 1997. Lots of familiar names, in fact you have pretty much the whole Bush national security team. Less Condi and Powell, which is instructive in itself.

Elliott Abrams Gary Bauer William J. Bennett Jeb Bush

Dick Cheney Eliot A. Cohen Midge Decter Paula Dobriansky Steve Forbes

Aaron Friedberg Francis Fukuyama Frank Gaffney Fred C. Ikle

Donald Kagan Zalmay Khalilzad I. Lewis Libby Norman Podhoretz

Dan Quayle Peter W. Rodman Stephen P. Rosen Henry S. Rowen

Donald Rumsfeld Vin Weber George Weigel Paul Wolfowitz

Never heard of the Kagans before the drumbeat to war picked up? Think Zalmay Khalilzad just happened to be available when the time came? The events of 2001 on just didn't happen, they were shaped. By people with a program. This one.

Step one in the program below the fold.

Letter to President Clinton on Iraq Jan 26, 1998

Dear Mr. President:

We are writing you because we are convinced that current American policy toward Iraq is not succeeding, and that we may soon face a threat in the Middle East more serious than any we have known since the end of the Cold War. In your upcoming State of the Union Address, you have an opportunity to chart a clear and determined course for meeting this threat. We urge you to seize that opportunity, and to enunciate a new strategy that would secure the interests of the U.S. and our friends and allies around the world. That strategy should aim, above all, at the removal of Saddam Hussein’s regime from power. We stand ready to offer our full support in this difficult but necessary endeavor.

The policy of “containment” of Saddam Hussein has been steadily eroding over the past several months. As recent events have demonstrated, we can no longer depend on our partners in the Gulf War coalition to continue to uphold the sanctions or to punish Saddam when he blocks or evades UN inspections. Our ability to ensure that Saddam Hussein is not producing weapons of mass destruction, therefore, has substantially diminished. Even if full inspections were eventually to resume, which now seems highly unlikely, experience has shown that it is difficult if not impossible to monitor Iraq’s chemical and biological weapons production. The lengthy period during which the inspectors will have been unable to enter many Iraqi facilities has made it even less likely that they will be able to uncover all of Saddam’s secrets. As a result, in the not-too-distant future we will be unable to determine with any reasonable level of confidence whether Iraq does or does not possess such weapons.

Such uncertainty will, by itself, have a seriously destabilizing effect on the entire Middle East. It hardly needs to be added that if Saddam does acquire the capability to deliver weapons of mass destruction, as he is almost certain to do if we continue along the present course, the safety of American troops in the region, of our friends and allies like Israel and the moderate Arab states, and a significant portion of the world’s supply of oil will all be put at hazard. As you have rightly declared, Mr. President, the security of the world in the first part of the 21st century will be determined largely by how we handle this threat.

Given the magnitude of the threat, the current policy, which depends for its success upon the steadfastness of our coalition partners and upon the cooperation of Saddam Hussein, is dangerously inadequate. The only acceptable strategy is one that eliminates the possibility that Iraq will be able to use or threaten to use weapons of mass destruction. In the near term, this means a willingness to undertake military action as diplomacy is clearly failing. In the long term, it means removing Saddam Hussein and his regime from power. That now needs to become the aim of American foreign policy.

We urge you to articulate this aim, and to turn your Administration's attention to implementing a strategy for removing Saddam's regime from power. This will require a full complement of diplomatic, political and military efforts. Although we are fully aware of the dangers and difficulties in implementing this policy, we believe the dangers of failing to do so are far greater. We believe the U.S. has the authority under existing UN resolutions to take the necessary steps, including military steps, to protect our vital interests in the Gulf. In any case, American policy cannot continue to be crippled by a misguided insistence on unanimity in the UN Security Council.

We urge you to act decisively. If you act now to end the threat of weapons of mass destruction against the U.S. or its allies, you will be acting in the most fundamental national security interests of the country. If we accept a course of weakness and drift, we put our interests and our future at risk.

Sincerely,

. Still imagine that we went to war with Iraq based on 9/11? That the decision to go to war was really made by the Decider sometime in February 2003? That if Saddam had just been a little more cooperative this unpleasantness would have been avoided? Sorry, no way. This decision was made by the people who signed this letter along with those who signed the Statement of Principles above. And note the one name that is glaringly absent, though his brother made the cut. Looks like they had to settle for the second choice when it came time for a figurehead.

Elliott Abrams Richard L. Armitage William J. Bennett

Jeffrey Bergner John Bolton Paula Dobriansky

Francis Fukuyama Robert Kagan Zalmay Khalilzad

William Kristol Richard Perle Peter W. Rodman

Donald Rumsfeld William Schneider, Jr. Vin Weber

Paul Wolfowitz R. James Woolsey Robert B. Zoellick

(In reading the Statement did you get the odd feeling like something was missing, that a couple of future team members weren't there? Say like Bolton, Perle and the other Kagan? Well have no fear, they were on board all along.)

rdan

Boston.com carries a lot of material on Senator Kennedy's life and politics, including comments from President Obama and Governor Schwarzenegger.

The man had a huge impact on American government.

Hedge funds increased their stakes in financial stocks during the second quarter according to the Goldman Sachs Hedge Fund Trend Monitor (WSJ). Specifically, ownership in financials increased 55% from Q1 to Q2, growing to $70 billion - representing 3.7% of the sector's market capitalization. Bank of America (BAC) and JPMorgan (JPM) were some of the more popular financial holdings within hedge funds, with Regions Financial (RF) and Citigroup (C) also becoming new long positions for some funds. While the net short position of financials also rose slightly, 8% to $63 billion, the large increase in long exposure has resulted in hedge funds being net long the financials by the end of Q2 (WSJ). Although hedge fund redemption request have decreased, reducing the need for forced selling, it is unclear if hedge funds on average will maintain their net long positions in financials after the nice run these stocks have made since the March market lows.

With USD trading stronger and oil and gold weaker and 10-year Treasury yields on the decline, the risk themes are aiming more toward risk aversion, and that has stocks trading at the lower end of their recent range (ES futures; chart above). Note continued heaviness in emerging markets (EEM); that, along with commodity weakness, continues to raise yellow flags for me longer term.
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rdan

Lots of comments did not "stick" yesterday, although there has been a problem intermittently in the last two weeks especially. Please wait for all "reply" "delete" links to appear at the bottom of your comment to confirm the servers keep it. I believe that a delay in processing is part of the problem.

When the issue appears resolved I will delete this post.

Let's take a quick look inside the Durables Report:

Transportation equipment, up three of the last four months, had the largest increase, $6.8 billion or 18.4 percent to $43.7 billion.

No really?  Cash for clunkers guys and dolls.  Of course that was up huge.  Go by a car lot lately?

Pulling forward demand looks good once.  It looks horrible later, because you suck all the oxygen out of the room and leave a vacuum behind.

Inventory drawdown continues, down 0.8% in July.  Again, most of this may be related to the CFC program.  We'll see.

Unfilled orders continued to decrease, showing that there is still no backlog build.  This is a forward-looking number as opposed to the rest of the series which is a look in the rear-view mirror.  Until and unless backlog starts to pick up you're not squeezing capacity utilization, and anyone calling "green shoots" needs their head examined - there simply is no argument for the slack in the system being taken up.

Defense orders are up 14.8%, again putting a fork in the Democrat/Liberal dreams of Obama pulling back on the military.  Nope.  This is a consistent trend since the beginning of his administration - he's a big-military guy folks, despite what you may have wished.  Welcome to reality; defense was the only year/over/year positive change.

Machinery shipments and new orders were both down, which is one of my "key item" areas for manufacturing on a forward basis, since machinery is what makes "stuff".  The slide there continues.

Ex-transportation shipments were up 2.2%, but new orders only up 0.8%, showing that again inventory continues to be drawn down.  Computers and related shipments showed an interesting divergence - computers and such themselves were up on shipments but down big on orders (back-to-school flop?) but communications gear was up strongly on both, with new orders up big.  Shipments on semiconductors were WAY up after being way down; this is the usual seasonal build for the upcoming holidays.  We'll see how this holds up next month.

Overall this isn't a horrible report but it appears to show that the inventory drawdown mode continues and has not turned in July.  The "inventory build" meme is critical to a positive 3Q GDP number - if it doesn't show up......

Next month's numbers will be the last look we get before the GDP print appears, and as such it will be a critical report in this regard.  I will be watching it VERY closely for this reason; while CFC will certainly spike GDP that's identifiable and I believe the general inventory trend will be the one that has to work if we're going to see those "strong" 3Q and 4Q GDP numbers - numbers that are critical to the continuation of the rally we've seen in the stock market.

In terms of the macro environment I'd put this report in the "weakly supportive" bin, with most of the support coming from the known distortions (cash-for-clunkers specifically) and a great deal of volatility in the aircraft order series that (in this instance) was good for a lift.  Durability of that trend is another matter; CFC is now gone of course, and until I see machinery orders and shipments turn on a durable basis (the last two months were pretty positive, but it went straight to hell this month, and it looks like a LOT of orders got canceled after the new orders numbers the last two months!) I can't call a trend change.

 

Yesterday we sent out an in-depth September seasonality report to Bespoke Premium subscribers. Below is one chart from this report that highlights the average monthly performance of the DJIA over the last 100 years. As shown, September is the worst month of all with an average decline of 0.96%. The only other month that has averaged a decline is February...

It just keeps getting better and better!

NEW YORK (Reuters) - A federal judge ordered Bank of America to explain why it agreed to pay $33 million to settle a U.S. Securities and Exchange Commission lawsuit if it believed it properly disclosed bonuses it authorized for Merrill Lynch & Co employees.

A day after receiving arguments from both sides about the proposed settlement, U.S. District Judge Jed Rakoff questioned the bank's willingness to settle, saying that if it was "to curry favor with the SEC or to avoid retaliation by the SEC, the court needs to know the specifics."

The judge, however, also questioned the SEC effort to end its civil case, suggesting it might be unreasonable to let off company executives and their lawyers without penalty.

Let's dig into some specifics from the order itself:

"... Where shareholders have been victimized by the violative conduct, or by the resulting negative on the entity following its discovery, the Commission is expected to seek penalties from culpable INDIVIDUAL OFFENDERS acting for the corporation."

BINGO.  Yet as this fine was "agreed" to be paid by the very people injured, in that it is coming from the company coffers rather than officers directly, it is exactly identical to fining the victim of a robbery when assessing the penalty, and what's worse, they didn't get a vote on being fined!

"In its August 24th submission, the SEC repeatedly reconfirms its central assertion that "Bank of America's [proxy] statement was materially false and misleading..."...... Yet the same submission asserts that the SEC, despite its 2006 policy quoted above, decided not to bring individual charges against culpable individual offenders because the company's witnesses "stated that they relied entirely on counsel to decide what was or was not disclosed in the proxy statement".....

This is puzzling.  If the responsible officers of the Bank of America, in sworn testimony to the SEC, all stated that "they relied entirely on counsel,", this would seem to be either a flat waiver of privilege or, if privilege is maintained, then entitled to no weight whatever, since the statement cannot be tested.

Heh, a Judge that actually applies logic!  I'm pleasantly surprised that we have a member of the bench who "gets it."

The Court goes on to say:

"It also leaves open the question of whether, if it was actually the lawyers who made the decisions that resulted in a false proxy statement, they should be held legally responsible."

Heh heh heh..... oh, that's good.  You mean that the old shyster defense of "The Dog Ate my Homework" didn't work on this Jurist? 

I'm doubly-impressed!

The bottom line is this: We now have two sitting Judges who seem to be rather tired of the game-playing and BS that has permeated our government's so-called "regulators" and so-called "officials" in this economic mess.

It is simply astounding that this sort of common sense has to come out of The Judiciary.  I thought the cops brought bad guys in front of the Judiciary!  You mean the only place we can find a pair of handcuffs (and a firearm - probably a "Judge" revolver at that) is behind the bench itself?

These corrections and sanctions should have come from the regulators and Congress, but instead of them doing their jobs, as I have repeatedly outlined over the last two years, they have been too damn busy on their knees playing "Blue Dress Paint-By-Numbers Club" with those on Fraud Street who have been robbing America (with both hands, since they seem to be free) for the last DECADE.

We desperately need the Judiciary to act in this matter.  To do so we need state attorney generals to bring hundreds of these cases, because quite clearly, The SEC and The US Department of Justice have not and will not.

It is time for the damn gloves to come off.  Our economy cannot recover until the scam street games are stopped, the fraudsters are removed from the executive suites (and if necessary from Washington) and the underlying frauds - particularly including the games played with the so-called "value" of assets on the balance sheets of various firms are all flushed out.

If CONgress won't do it then let's start putting pressure on our State Attorneys General to get these cases in front of Judges and do it that way.

This is simply unbelievable:

Britain’s taxpayer-owned banks are selling repossessed property assets to their own subsidiaries to avoid billions of pounds of losses that would be incurred by selling them in the open market.

Royal Bank of Scotland (RBS), which is part-owned by the Government, has set up West Register to buy properties taken over by RBS after borrowers had fallen into default.

Lloyds Banking Group, which inherited billions of pounds of commercial property loans when it took over HBOS, is understood to have a similar subsidiary that buys assets from its owner.

See how this works?  You buy the "asset" from yourself (in your subsidiary) at vastly more than anyone would pay for it in a free market and by doing so you avoid taking the mark-to-market loss.

This means you don't have to show that loss on your balance sheet, nor do you have to count it against your capital reserves.

I'm rich!  All I have to do to recognize "fair value" is pass assets from one captive entity to another!  Heh, that's a free-market sale and "establishes a market price", right?

Didn't our S&Ls pull this same crap as they were trying to avoid marking to the market and ultimately failing?  I think they did!  Indeed, while it was BETWEEN S&Ls in that case it was the same game - "I'll buy this defaulted loan at par from you, you buy that defaulted loan from me at par!  See - Market price!"

William Newsom, head of valuation at Savills, the property group, said: “Banks sell the property but, rather than selling into the market, they go into a workout vehicle. It is a model that we saw in the last downturn. The subsidiary pays what the property would fetch on the open market. It has to be a fair value.”

Riiiight.  "Fair Value" eh?

So why not sell it in the open market?  It wouldn't be because there are no bids at the asked price in the open market, would it?

An industry source familiar with the practice said: “This is a legitimate strategy that was pursued at the end of the previous recession. It means that the bank is able to avoid crystallising the loss, although it is still on the balance sheet.

"Crystallising" eh?

Ah, that's a fancy word. 

I think it means to avoid taking it against capital, no?

This is legal over in England?  You have to be kidding me.

Yet our Fed issues swap lines into those nations......

Unbelievable.

I'm rather stunned that I have to do this.

Yesterday afternoon part of my Ticker on the "Cash For Clunkers" was apparently replicated, almost word-for-word, in the "subscriber only" area of a very prominent national talk show.  A serious part of it was also nearly word-for-word read on the air.  This was brought to my attention almost immediately by people commenting on the forum, and confirmed by multiple people who claim to have heard it "on air."

I have personally verified this; while the original source for my Ticker (which I cited and linked) was linked the majority of the commentary he quoted didn't come from that story.  Specifically, my commentary about how sales tax on new vehicles sales is computed.  Those sounded like "golden" original words - they weren't.

The Market Ticker has always has a very liberal republication and citation policy.  Provided that material is not taken out of context and proper credit is given to the source any online media outlet is free to use The Market Ticker's content - this is explicitly stated on the right sidebar of every page.  I request that other-than-online (print, radio, TV, etc) media request permission using the link provided for other uses - permission that I routinely grant, provided of course that attribution is given.

It is plagiarism and unseemly at best to attempt to co-opt another's work as your own without credit.

I am flattered that one of the bastions of Conservative Talk Radio apparently has The Market Ticker on his (or his staff's) personal RSS feed, seeing as the comment was made on-air just a short time after it was posted.

Nonetheless, journalistic integrity demands that when you're going to use something that another person has written wholesale (or so nearly so as to be linguistically indistinguishable) you attribute where you got it from.

If this was an honest error, then a correction is in order and would be appreciated.  I certainly understand that people get busy and make inadvertent mistakes - we have all erred, either in omission or commission, at some point in time, myself included.

While I'm on the topic of conservative talk radio may I ask why these very same commentators have not bothered to take up the cause of the rampant and outrageous fraud in our financial system and pin that tail on both political parties along with the banksters - where it most assuredly does belong?

Perhaps both lapses of judgment can be rectified going forward and we can see the alleged conservatives on talk radio live up to the billing.

It would be a welcome change.